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Bitter CLICO pill

Bryan Walker

Bitter CLICO pill

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EMBATTLED POLICYHOLDERS are not only shaking their heads at the prospect of losing big chunks of their investment in the collapsed CLICO International, but are losing confidence more and more each day in future private investment and Government regulation.
And even though Minister of Finance Chris Sinckler has stressed that Government is still looking at June for a grand resolution – one that would not only look after the interest of the 30 000 CLICO policyholders, but the entire country – there appears to be a growing apathy yet.
This past week, a number of executive flexible premium annuities (EFPA) policyholders expressed frustration with the political promises and process being undertaken, with some saying outright they had lost all trust in the Government and its oversight of the matter.
And, a number of them sought to refute charges that they had been motivated by sheer greed when they pumped money in the CLICO International Life (CIL) policies. Just over $300 million in EFPAs was invested in CLICO.
Johanna Mayhew, a 76-year-old, who invested a “substantial sum” in EFPAs in 2005 that were to mature in November 2010, is still waiting to hear if and when she will be able to collect her money.
She was one who, when the rush was on in 2009 to withdraw monies from the troubled company, decided to stay the course.
“I looked at it as an investment to make me remain independent as long as I lived and not having to be relying on my children to support me in any way,” she told the SUNDAY SUN in an interview on Thursday.
“It wasn’t that I was greedy; I saw that as a way of keeping me going, keeping the house [maintained], putting a little something aside for my grandchildren . . . . My car is 19 years old. If I were greedy, I would be trying to buy a car as a status symbol.”
Mayhew said it was the subsequent “assurance” from then Prime Minister David Thompson that calmed her fears. Now she wished she had done otherwise.
“The Prime Minister came out in January 2010 and said, ‘Don’t panic, your money is safe; the company is well-managed’ . . . . I figured he could not say that unless he knew what he was talking about.”
She added that subsequent assurances from Thompson’s successor made her feel there was also hope for a return of her investment. Her policy was due to mature on November 4, 2010, her 75th birthday.
“When November 4 came, they sent me a letter saying they couldn’t pay me, but that the money was safe. The letter said they would take the principal and roll it over for another two years, and the interest that was due in November rolled over with it.
Well, I couldn’t do anything about it.”
She said when she read the details of the forensic audit into the spending at CIL, she was more than shocked by the level of expenditure.
She was also alarmed at the close relationship between Thompson and former CLICO executive chairman Leroy Parris, and the revelation that $3.3 million in legal and retainer fees from CIL received by Thompson’s law firm was destined for Parris.
Another policyholder, also 76, said he had lost all faith not only in the Government, but in investing in private business.
The former businessman, who declined to have his name published on the advice of his attorney, said he had invested $1.4 million in five-year EFPAs.
Showing his documentation, he revealed the first was for $1 million in 2008, split in three separate investments of $300 000, $300 000 and $400 000 respectively; and another in November, 2009, for a further $400 000.
Up to July last year, he was being paid monthly interest of over $8 000 at 8.5 per cent. But that same month, he received correspondence from CLICO stating that future payments would be suspended until further notice.
So between then and now, he has lost nearly $70 000 in “much needed” monthly interest payments.
The elderly man said Thompson’s assurance had given him “total, total confidence”.
“When he came out and gave that assurance, I felt I could have taken it to the bank. Unfortunately, he passed on, and this Prime Minister came out and gave the same undertaking. And so I felt comfortable.”
But the investor, after observing the difficulties Al Barrack was having being paid the $70 million plus owed by Government, said he became frustrated.
“I have lost confidence on our Government completely.”
He also refuted suggestions that people like him were greedy and failed to take due care in examining the true nature of the EFPAs.
With his wife at his side, the man who ran his own business in the service industry for 26 years, and sold it off in early 2000, told the SUNDAY SUN from  his St Michael home:
“I can’t say that [it was greed], because I remember a time at Royal Bank we had a short-term fixed deposit for 7.5 per cent. So I didn’t think that [8.5 per cent] was excessive, but as it turned out, the company went bottom up.
“I had done business with CLICO before and I never had problems . . . .
“When the debacle started to unfold, my lawyer told me that not only was CLICO liable, and the Government which stood by CLICO, but the agent who sold after 2009, who knew very well that they shouldn’t have been selling.”
The elderly former businessman said he subsequently spoke to that agent who expressed his regret.
Another CLICO policyholder, who submitted a letter to the SUNDAY SUN this past week signed A Very Disillusioned Client, stated the “man-made disaster” had angered him to the core.
“Approximately seven years ago, I retired from work medically injured. I received a small gratuity which I invested with that company . . . . I was told it was sound and had the backing of the Government . . . . I did this in good faith with the assurance that I would have a little nest egg which would assist me with my continuous medical bills and, by some chance, [would afford me] a little left for old age.”
The writer, who said he/she was now living from pension cheque to pension cheque, added: “Gone are the days when persons saved their money in the mattress, in the cellar or in a hole in the backyard. Maybe we should go back to those days.”
As far as a resolution is concerned, policyholder Mayhew said she would be satisfied right now with the return of her principal. Her last interest payment was in November 2009.
She believes the elderly should be the first to be paid out.
“Of course I would be biased, but I am in the departure lounge [of life]. If I were young, I wouldn’t see it as a bad thing getting 60 cents on the dollar and the other 40 per cent in shares in a new company.
“But an old lady like me hasn’t got much to look forward to in time – and this [company] will take time to get going [again]. For old people, I don’t feel that is a good option. I would be quite satisfied to take the loss and just give me my principal.”
The former businessman said though he would like all his money back, he would accept $1 million out of the $1.4 million he invested. But he felt payouts should be based on circumstances, and not necessarily old age.
“But at this stage, seeing how the Government has fallen down so badly on its word, I think that CLICO’s assets should be disposed of and the creditors paid out. If they were forming a new company and they could manage 80 cents on the dollar, I would settle for it. I would gladly take the rest in shares.”
And in reaction to Sinckler’s comment on looking after the other 240 000 Barbadians’ interest as well, he said this evoked his ire.
“When I read that, I was so ticked off. He is talking about looking after 240 000 people – and I can understand that – but he can’t even look after 30 000. His word is meaningless as far as I am concerned.”
He said the saga had not only shaken his faith in investing and the Government, but had adversely affected a lot of people he knew, with some now having to sell properties to sustain themselves, while in other cases it was taking a toll on others’ health.
“I have a friend, a doctor, who told me of an investor who worked for a company that didn’t have a pension plan. He saved everything he had and dumped it into CLICO so that when he retired, he was like me getting his monthly [cheque].
“When that thing happened, his pressure went through the roof, above 200. In two weeks he was dead. That thing killed him!”
However, Parliamentary Secretary in the Ministry of Finance and Economic Affairs, Senator Jepter Ince, said he had repeatedly warned Barbadians over the years that the CLICO EFPAs were a bad buy.
Ince, speaking during a panel discussion on the economy last Thursday night at Ellerton Wesleyan Holiness Church in St George, said he was glad that back in 2000, the Government had taken his advice not to invest one cent in the annuities.
Ince, who then was the investment officer to the Sir Henry Forde-chaired National Insurance Board, told those gathered: “In 2000, I wrote a report on CLICO Life and I advised Sir Henry Forde not to invest in that flexible premium annuitythat all of you went and put your money in, and did not listen.
“I wrote in that report that the interest rate CLICO was paying was too high and did not reflect what was happening in the country; and if there is a change in the external environment, it was going to threaten the viability of CLICO. The report is still there.”
Responding to concerns by a few members of the audience who had EFPAs, he said he could give no one the assurance that they would get their monies back.
Ince too posited the view that a lot of the investors were motivated by greed when they pumped money into the CLICO instrument.
“Persons did not pay attention . . . and now it comes back to haunt us today . . . .”